San Antonio-based H.E. Butt Grocery Co. (H-E-B) is eyeing a North Texas expansion.

Although it is “too soon to tell what (store concept) we would do in Dallas,” the chain is “surveying the area, looking for potential sites,” in the Dallas-Fort Worth market, confirms Dya Campos, public affairs director for the San Antonio and West Texas regions of H-E-B.

“It is something we are considering heavily, and a market we hope to be in, in the near future,” she said, although an exact time line is still being determined.

The first step in the expansion is already under way. In August, H-E-B began construction on a 450,000-square-foot distribution center in Temple. The facility will house stock for stores in Austin and Dallas.

The distribution center in Temple will enable H-E-B to “better serve our stores in Central Texas,” says Campos, adding that the “natural progression” of that investment is to “move north” and expand the brand in Texas.

Not that the greater Dallas market is completely uncharted territory for H-E-B, which brought its Central Market concept to the area several years ago. To date, the company has planted four Central Market flags in the area — in Dallas, Plano, Fort Worth and Southlake.

The stores have been extremely popular with Dallas foodies, Campos says.

The Central Market concept, which debuted in 1994 in Austin, features an upscale format offering customers a range of fresh and prepared food.

Bountiful market

The greater Dallas area is already home to several major grocery chains — including Tom Thumb, Kroger and Albertsons.

There’s a reason why so many grocers have gravitated to the area. It offers a bountiful population of 6.6 million people spread out among 12 counties in North Texas, notes Ian Pierce, real estate analyst for Dallas-based firms Cencor Realty Services and The Weitzman Group.

“The Dallas-Fort Worth area is widely considered to have the most competitive grocery market in Texas, and one of the most competitive in the country,” he said.

The possibility of H-E-B entering the North Texas market has long been a topic of discussion in real estate circles, said Steve Lieberman, CEO of The Retail Connection, a commercial real estate firm based in Dallas.

“It’s really been a question of when, not if (H-E-B will open North Texas stores),” Lieberman said. “Dallas is a major commitment, so I don’t see them coming into the area until they can do it in a major way.”

According to the November 2009 edition of trade publication The Shelby Report, which breaks down market share numbers for the greater Dallas area, Kroger currently ranks as the No. 2 grocer, with 15.7% of the Dallas/Fort Worth market. Coming in at No. 3 and No. 4 were Tom Thumb and Albertsons, with market shares 10.4% and 8.8%, respectively.

The top dog? Wal-Mart, which holds sway over 34.4% of the greater Dallas grocery market.

H-E-B took the No. 9 spot, with a market share of 2.1%.

Several of these grocers are working to increase their presence in an effort to increase market share.

Kroger, for example, recently announced plans to build two stores — one in Frisco, and in Fort Worth. Both will fall under the chain’s Marketplace prototype, which average 123,000 square feet and include groceries and general merchandise.

And this past July, Safeway, the parent company of Tom Thumb, turned dirt on its first new Tom Thumb store in more than five years. The store is located in Rockwall, and future stores are planned in Frisco and Flower Mound.

Significant commitment required

Given the players already in North Texas, H-E-B would want to go in there in a big way — with several stores at once, says Michael N. Jersin, president, chief operating officer and principal of United Commercial Realty in San Antonio.

“It would take a pretty significant commitment,” he says.

But if there’s a grocery chain that could penetrate this competitive market, H-E-B is certainly one that has a shot. Last month, the chain took the No. 19 spot on Forbes magazine’s list of America’s largest private companies, with 2008 revenue of $15.2 billion and 71,000 employees company-wide.

“H-E-B is the textbook study for supermarkets nationwide,” says Terri Gault, founder of The Grocery Game, an online business that tracks the sales of 160 supermarkets across the country, including H-E-B.

H-E-B AT A GLANCE

• Owns and operates more than 300 stores in Texas and Mexico.

• Has 50 stores in its hometown of San Antonio; recently opened its 71st store in Houston.

• Over the years, the company has evolved beyond the traditional supermarket format, introducing prototypes such as Central Market, H-E-B Plus and Alon.

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